First published: ft.com, 29/01/2014
Emerging markets look stronger than in the 1990s but they are vulnerable
The decision late on Tuesday night by the Central Bank of Turkey to increase interest rates substantially has taken many observers by surprise. Yet there was no other way to stem the decline in the currency and alleviate the threat of a damaging exodus of foreign capital. Even so, it may not have been enough. The monetary squeeze buys some time before elections but also intensifies the political and economic crisis. Turkey is not alone in facing these problems. In many ways the country is a dark star in a volatile emerging market firmament.
Turkish economic growth was spectacular in 2010-11. It is pedestrian now. The official forecast that the economy will grow by 4 per cent in 2014, hardly ambitious to begin with, cannot now be met. This matters a lot to investor confidence, and also to a country that needs its economy to grow if it is to supply jobs for young people entering the labour force….”more:”